Exclusive: Former Tezos board member says founders have caused a 'catastrophe'

ZUG, Switzerland/NEW YORK (Reuters) - The co-founders of a cryptocurrency project called Tezos have caused a “catastrophe” by making unfounded accusations against the president of a Swiss foundation that controls the money raised, a former board member told Reuters.

FILE PHOTO - The names of Tezos Stiftung foundation and the companies Monetas AG and Crypto Valley GmbH are seen on a post box at an office building in Zug, Switzerland October 5, 2017. REUTERS/Arnd Wiegmann

In his first interview since resigning from the three-member board of the Tezos Foundation in December, Guido Schmitz-Krummacher blamed the project’s creators, Arthur and Kathleen Breitman, for delays in writing computer code and setting up infrastructure that would allow the cryptocurrency to launch.

The project, which raised $232 million in July, remains in limbo because of corporate infighting.

“Tezos might be delayed or not achieved, especially if the conflict is ongoing,” he said.

A representative for the Breitmans did not immediately respond to a request for comment.

The Tezos fundraiser known as an "initial coin offering" was structured as a donation, though some contributors believed it was an investment. (reut.rs/2DNtXPQ)

The Breitmans have been locked in a battle over control of the project with Johann Gevers, president of the Tezos foundation. While the Breitmans control the project’s code through their Delaware-based company, the foundation oversees the money.

In October, an attorney for the Breitmans sent a 46-page letter to Schmitz-Krummacher and another board member, demanding Gevers’ removal and accusing him of “self-dealing, self-promotion and conflicts of interest.”

The foundation launched a probe into the accusations, which did not find proof of wrongdoing prior to Schmitz-Krummacher’s resignation, Schmitz-Krummacher, said. The Breitmans did not hand over additional evidence to help investigate their claims, according to Schmitz-Krummacher.

“Until today, I do not have any result which substantiates or supports the accusations made in the letter in such a way that it would provide – according to the legal rules for foundations – an important reason for dismissing Johann Gevers,” he said. “The results didn’t please the Breitmans and, on that basis, they tried in various ways to threaten me and put me under pressure.”

The letter the Breitmans sent created a “catastrophe” for the Tezos project, especially because the claims have not been substantiated, Schmitz-Krummacher said.

Gevers did not respond to a request for comment.

Reuters detailed the battle between the Breitmans and Gevers last October. Since then, at least six class-action lawsuits have been filed in the United States against the project’s organizers, alleging the Tezos fundraiser violated federal securities law and defrauded participants.

Being involved with Tezos led to threats, blackmail attempts and other “destructive activities” that prevented the board from functioning properly, Schmitz-Krummacher wrote in his resignation letter, which was seen by Reuters.

Contributors to the Tezos fundraiser have not yet received the digital coins they expected, called Tezzies. Their contributions were made in bitcoins and ether, cryptocurrencies whose values have surged since the fundraiser was held.

The foundation has not yet replaced Schmitz-Krummacher.

Some Tezos supporters have attacked Gevers on social media and demanded he leave.

“We are gravely concerned about Mr. Johann Gevers and his failure to realize the purpose of the Tezos Foundation,” said an online petition released by a group of aggrieved offering participants in December.

Reporting by Brenna Hughes Neghaiwi in Zurich, Anna Irrera in New York and Steve Stecklow in London.